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Thursday, 22 February 18
WHY THE COMMODITY RALLY WILL GET BACK ON TRACK - SIMON FLOWERS
 Implications for the US dollar and producers
Are we in the early stages of a sustained rise in commodity prices? And what does it mean for the US dollar?
We posed these questions a year ago when robust global economic growth was driving commodity demand and the US dollar was starting to tip over from a 15-year high. The two are inextricably linked, though which is the horse and which the cart is not always clear. The recent disruption in financial markets suggests it’s worth a fresh look at the relationship.
Over the past couple of years, there has been a broad improvement in commodity prices, with indices up by around 50% on average since early 2016. It’s been far from uniform, and different commodities bottomed at different times.
Iron ore and oil have seen the most spectacular rebounds, both up more than 100% from their lows.
The fundamentals in each commodity market are very different, but Principal Economist Jon Butcher identifies common factors behind the recovery.
First and foremost is growth in the global economy. GDP growth strengthened from a low of 2.3% in Q1 2016 to a six-year high of 3.1% in Q4 2017. The upswing has been broadly based with growth accelerating across Asia, Europe and the Americas. In 2016, emerging market growth was just 3.7%; this year we expect 4.6%, with China and India driving much of the improvement. This is doubly important for commodity demand, given the resource-intensive nature of emerging market growth.
Then there is the US dollar. The currency dropped 10% on a trade-weighted basis by end-January 2018, from its high of a year ago. The relationship between the US dollar and commodity prices is not straightforward, or indeed constant. But the dollar tends to be inversely correlated with commodity prices; a weaker dollar usually means stronger commodity prices, and that’s what we’ve seen over the past six months.
The fall in the value of the dollar reflects strength in the emerging world rather than a weak US economy.
It’s also sentiment: with confidence boosted by the global economic upswing, investors have shifted capital out of traditional safe havens like US treasuries into riskier assets with potentially higher returns.
Better prospects for growth in major trade partners like Europe and Canada, and with the expectation of monetary tightening in those economies, they have pushed their currencies higher against the dollar. We’d expect continued dollar weakness through 2018 given the prospects for a strong year of global economic growth.
Financial market volatility in the last fortnight has upset the apple cart. Commodity prices have corrected and the US dollar bounced by 4%, taking it back to December levels. US jobs data released on 2 February highlighted tightness in the US labour market.
Associated wage gains prompted fears of higher inflation and raised the prospect of accelerated US interest rate hikes. Uncertainty spiked, and equities and commodities dropped. Increased risk aversion effectively pulled capital back into safe havens like the US.
So, turning point or just a blip? More likely the latter.
Our view is that the global economy is set fair for growth at a healthy pace, perhaps a tad slower than in 2017-18. Developing economies in particular will do well.
This provides a backdrop for a sustained recovery in commodities over the next five years, though each commodity market has its own fundamental story. Oil, for example, is stuck in oversupply for the next two years before the market tightens into the early 2020s.
As commodities gradually recover, the US dollar should revert to gentle decline – though markets adjusting to the end of 'easy money' means it will doubtless be a bumpy ride for the currency and commodities alike. If we’re right, then some commodity producers may be on a journey to a better place in the next few years – firmer prices and better margins.
On the other hand, it might not pan out this way. So producers have to learn from this tough down cycle and persevere with the relentless drive to keep costs down so they can still make money even at future cycle lows – and wherever the US dollar travels. That has to be the goal.
Simon Flowers
Chairman and Chief Analyst
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Tuesday, 17 October 17
U.S RECORD EXPORTS OIL TO EAST HAS HELPED THE TANKER TRADE - GEORGE LAZARIDIS
There was a flood of fresh news this week which clouded the overall prospects of the crude oil market. Just one week prior Saudi Arabia and Russia, ...
Monday, 16 October 17
INDONESIA TO INDIA COAL FREIGHT RATES STAY FIRM
COALspot.com: The daily average earnings for Supramax, for the route Indonesia to India passing through Singapore has stayed firm, week over week, ...
Friday, 13 October 17
INDIKA ENERGY SIGNS SHARE PURCHASE AGREEMENTS FOR AN ADDITIONAL 45% STAKE IN KIDECO
PT Indika Energy Tbk. and its wholly-owned subsidiary PT Indika Inti Corpindo (collectively, “Indika Energy”) has entered into separate ...
Friday, 13 October 17
THE SHORT-TERM OUTLOOK FOR THE PANAMAX MARKET REMAIN POSITIVE - FEARNLEYS
Supramax
The market has picked up strongly since last week with the Chinese holidays. In the Pacific rates are increasing with some strong number ...
Friday, 13 October 17
U.S. COAL EXPORTS FOR THE FIRST SEVEN MONTHS OF 2017 TOTALED 51 MMST; UP 62% YOY, EIA DATA SHOWS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.2 million shor ...
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Showing 1911 to 1915 news of total 6871 |
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- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Economic Council, Georgia
- Intertek Mineral Services - Indonesia
- SMC Global Power, Philippines
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Indo Tambangraya Megah - Indonesia
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- Kideco Jaya Agung - Indonesia
- Iligan Light & Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- Latin American Coal - Colombia
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- MS Steel International - UAE
- ICICI Bank Limited - India
- White Energy Company Limited
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Pendopo Energi Batubara - Indonesia
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Indian Oil Corporation Limited
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Planning Commission, India
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Ministry of Mines - Canada
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Romanian Commodities Exchange
- Deloitte Consulting - India
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- PTC India Limited - India
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Independent Power Producers Association of India
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Kepco SPC Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Vedanta Resources Plc - India
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- LBH Netherlands Bv - Netherlands
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Kartika Selabumi Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- Australian Coal Association
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- Indonesian Coal Mining Association
- Posco Energy - South Korea
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Dalmia Cement Bharat India
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Marubeni Corporation - India
- Semirara Mining Corp, Philippines
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Mintek Dendrill Indonesia
- Bayan Resources Tbk. - Indonesia
- Aboitiz Power Corporation - Philippines
- Indika Energy - Indonesia
- Altura Mining Limited, Indonesia
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